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Staff outlines state savings: proposed transfer would push stabilization fund to statutory cap
Summary
Legislative staff reviewed the growth of the budget stabilization fund and the Public Education Stabilization Fund (PSIF). The governor recommends a $59 million transfer to the budget stabilization fund that would raise its balance to about $939 million and could hit the statutory cap of 15% of general fund revenues if projections hold.
Legislative staff briefed the committee on the state's major savings accounts and their role in buffering recessions.
Keith Bybee, Legislative Services Office, explained the governor's proposal includes a $59 million transfer to the budget stabilization fund, which would raise the fund from about $880 million to roughly $939 million. "That additional $59,000,000 represents a 6.7% increase from fiscal year 2025," Bybee said. He noted that at projected revenue levels the fund would reach the statutory target cap (15% of general fund revenues) and that last year the legislature temporarily suspended the relevant code language that would have otherwise forced automatic transfers back to the general fund.
Bybee also reviewed the Public Education Stabilization Fund, which functions as overdraft protection for public school support. Under the governor's projection PSIF would rise to about $293.6 million, roughly a 20% change, and PSIF itself is capped at a percentage of public school support as set by statute. The presentation included historical context: the state's total set‑aside and savings position is much stronger now than during the 2009 recession when the state had $641 million available and then used that over three years.
Why it matters: Stabilization funds provide the legislature and the governor tools to smooth budgets across economic cycles. The committee must decide whether to adopt the governor's proposed transfer into the stabilization fund or instead free more cash for spending or tax relief.
Questions from members included how interest earnings on reserves and the relationship between statutory caps and transfers are calculated; staff said further detail on interest earnings would be presented later by treasury staff.
